Check out, but never leave

The reality of Brexit is starting to become apparent, writes Eddie Ford. And the government is increasingly under pressure from big business

Money is at stake

This paper has previously made the point that, compared to recent times, big business in the 1950s and 60s was politically active and often highly visible. As for those businesses or companies that liked to keep their activities, donations, links, etc, more secret, you had institutions like the Labour Research Department (originally set up by the Fabians in 1912 as the ‘Committee of Inquiry into the Control of Industry’) which insisted on examining the books and generally poking around: finding out who was sitting on the boards, who has what, and so on.1 Indeed, the LRD also investigated the use of blacklists and other nefarious practices.

Nowadays though, in terms of the role of big business and politics, it seems to play a very peripheral role - which is rather odd. Rather, what you tend to get with regards to people who openly back and fund political parties, is rogue millionaires or billionaires. Like Arron Banks with the UK Independence Party, Lord Ashcroft with the Tories, or John Mills with Labour. But, quite obviously, these people are not core members of the bourgeoisie, or representatives of the key institutions of British capitalism - not the head of Barclays Bank, for instance, or Lloyds of London. Those institutions seemed to have retreated from playing that role.

Maybe this was because for a certain time it seemed to the bourgeoisie that they had three capitalist parties, so were safe - Labour under Blair, the Liberal Democrats and, it goes without saying, the Tories. Why do we need overt political intervention under these circumstances? However, recently things have happened that were not meant to happen. Such as the idiotic David Cameron, spooked by polls showing a Ukip surge, nearly losing Scotland and then going on to lose the European Union referendum - an unforgivable act as far as wide sections of the British establishment were concerned. Then the bourgeoisie ‘lost’ Labour with the sudden ascendency of Jeremy Corbyn - another thing that was definitely not meant to happen.

Though still hardly clamouring away, big business is beginning to find its voice again in response to the new, unwelcome situation. Increasingly, both openly and in private, big business is beginning to agitate and put pressure on government - first and foremost over Brexit, of course.

Transitional

Now barely a week goes by without some company announcing that it is opening up a new, important office in Paris, Dublin, Vienna or Frankfurt, with the loss of so many jobs. For example, it emerged last week that the US investment bank, Morgan Stanley, has selected Frankfurt to be its new European hub in preparation for Britain’s departure from the EU.2

Lucia Puttrich, Europe minister in the government of the state of Hesse, told TheGuardian that she had been in talks with several banks about expanding their presence in Frankfurt, explaining that there “will be a transfer from those who need to have an office in the European Union because London will not be in the internal market”. Researchers at the Bruegel think-tank have forecast that Frankfurt will take the biggest share of London’s post-Brexit business in a report that predicted the loss of 30,000 jobs in the City.

Alarmed by Brexit, 30 chief executives of the UK’s top companies on July 7 had a ‘private’ meeting with Theresa May at Chevening House, the official residence of the foreign secretary - but, of course, it was fully reported in the Financial Times. The newspaper disapprovingly noted that, since May entered Downing Street a year ago, she has “displayed indifference towards business and its views on what makes the economy work” - but “her humiliation in last month’s election has forced a rethink” (July 6). Hard to disagree. The paper also observes that, although big business “accepts that Brexit will happen”, albeit reluctantly, “what they want is greater certainty about the form Brexit will take”. Indeed, it insists that continued membership of the customs union and the single market during the “transition period” would offer the most stability. In reality, of course, big business would much prefer the UK to stay in the EU - or, failing that, adopt some sort of Norwegian or Swiss arrangement, or at the very least an indefinite “transition period”.

Two weeks after Chevening we had the inaugural meeting of the ‘business council’ - which will be a regular meeting between the prime minister and various business leaders, ironically less than a year after May disbanded a similar body set up by David Cameron. The FT acidly notes that May was “shielded from direct encounters with business leaders” for almost a year by her former chiefs of staff, Nick Timothy and Fiona Hill, “as part of a conscious effort to rebrand the Conservatives as a party of the working class” (July 20).

Summing up the mood at the business council, Stuart Rose - the Tory peer and chairman of online grocer Ocado, who backed ‘remain’ - said the general election had been a “proxy re-referendum” against ‘hard’ Brexit. In attendance were the heads of five lobby groups, including the Federation of Small Businesses, and seven leaders of companies with a big interest in Brexit: Jaguar Land Rover, National Grid, Prudential, Risk Capital, Decoded, Tesco and BAE Systems.

Theresa May was told in no uncertain terms that ‘no deal’ with the EU was not an acceptable option and that she needs to back away from the Brexit cliff edge - by which they meant that the British government must strike a transitional deal lasting at least two or three years to protect business from a post-Brexit upheaval. Furthermore, City of London participants urged the prime minister to recognise the “importance” of the financial services sector and its need for “high-quality international talent” - ie, please don’t cut off all EU immigration.

The prime minister, flanked by chancellor Philip Hammond and business secretary Greg Clark, promised there would be “no cliff edge” and May has instructed her ministers to talk of an “implementation phase” rather than a transitional period - sophistry that fools no-one.

Pragmatic

Gritting their teeth, more and more ministers have simply come to accept that the Brexit negotiations will be more complex and time-consuming than previously imagined and that therefore a transitional deal of some description is an unavoidable political reality. After saying only a week ago that a Brexit deal will be one of the “easiest in human history”, and that interim arrangements for trade, customs and migration should last no longer than “a few months”, trade secretary Liam Fox has now conceded that Britain is likely to seek a transitional deal with the EU that will last until 2022 - though such arrangements should not “drag on” beyond the next general election.

Brexit secretary David Davis has publicly softened his approach in recent weeks, telling a House of Lords select committee that “practicalities” would force a need for a transition period. Meanwhile, environment secretary Michael Gove said the cabinet is “united” behind a transitional period, but, rather than stating how long he thought that would last, he noted that “pragmatism is the watchword”. Ditto with free movement: a “pragmatic approach” was needed to give “reassurance” to businesses.

Everything indicates that the government is seeking an “off-the-shelf” arrangement, in which Britain would likely remain in the single market and retain free movement for at least two years after the UK formally leaves the EU in March 2019 - not to mention the continued operation in some form of the European Court of Justice. One possibility during the transition period is membership of the European Economic Area, which includes single-market access and exemption from some EU rules, though members still have to make budget contributions and accept free movement. Or there is the Swiss model with membership of the European Free Trade Association, which entails access to the EU market for some, but not all, areas of trade, continued free movement, but no duty to apply EU laws. However, committed ‘hard’ Brexiteers would see either option as treachery.

For example, Charlie Elphicke, an officer of the influential European Research Group of Tory backbenchers which wants the government to just get on with Brexit as fast as possible, remarked that any implementation phase had to be genuinely “transitional”, not indefinite or open-ended. “Otherwise people will worry that we will end up in a ‘Hotel California’ situation,” he said: “You can check out, but you can never leave.”

We are clearly witnessing a distinct shift in the British government’s stance, with the likes of foreign secretary Boris Johnson, Gove, Davis and now even Fox moving towards the position of Hammond, who has always been a staunch proponent of a transitional deal that retains the current trading arrangement with the EU. Interestingly, the trade secretary previously clashed with Hammond over whether the UK should be prioritising seeking free trade deals, with the chancellor saying such deals would have limited benefit for the UK. He declared at the G20 summit in Hamburg that “much of our trade with the world is service trade, where free trade agreements won’t make any particular difference”. Fox chided Hammond about this in an article for TheSunday Times, writing: “Having the world’s largest economy publicly show commitment to increasing trade with us is not something we should sneer at” - obviously referring to Donald Trump’s comments about a quick trade deal with the UK post-Brexit (July 23).

But, sniping aside, the direction of march is clear - towards a transition period and continued free movement. The Brexiters have even surrendered to the idea that the UK will have to pay a substantial divorce bill to the EU, whether that be £20 billion or £100 billion. The EU will not have to “go whistle” for its money (Johnson), but just put its hand out for the cheque - thank you very much. Cold, sobering Brexit reality is starting to bite for the British government.

All this repositioning and new-found pragmatism is precisely what Nigel Farage has always feared: the systematic undermining of the Brexit vote. And, after keeping its mouth shut for so long, big business is moving to put its own imprimatur on the Brexit negotiations - whatever we eventually end up with.